March 4, 2013 Comments

It was a decent day at least in the American markets with the DOW up 0.3%.

Walmart was up 2.2%.

Some people figure that stocks are expensive simply because the DOW is near its record high. But that is totally normal. The last high was five years ago. S&P 500 as well as DOW earnings are somewhat higher than they were five years ago. The U.S. GDP is higher than it was five years ago. Interest rates are lower. So we should fully expect the markets to surpass their old highs. That’s what markets do.

On the other had growth expectations are low and that does act as a gravitational force on the markets. And if interest rise that is also a gravitational force. Investors may be wise to keep some cash ready to buy bargains should they appear. Or be ready to use new savings to do so.

Overall the fact that markets are at record highs is far from any clear danger signal. Markets are unpredictable. In the short term, they will rise and they will fall unpredictably. Over long periods of time they will rise due to profitable businesses retaining earnings and growing.